Independent Hospital Pricing Authority releases national efficient price for 2013-14 for Australian public hospital services

The Independent Hospital Pricing Authority (IHPA) today released the national efficient price determination for Australian public hospital services for 2013-14.

The national efficient price for 2013-14 is $4,993 per national weighted activity unit. This compares with the 2012-13 price of $4,808.

The national efficient price for public hospital services underpins the national introduction of activity based funding across Australia for Commonwealth funded public hospital services.

Shane Solomon, Chair of the Pricing Authority said IHPA has determined a national efficient price that reflects the costs of delivering the many different services provided by hospitals across Australia.

This is the first time that IHPA has defined the scope of services eligible for Commonwealth funding under the National Health Reform Agreement. Consistent with the National Health Reform Agreement, IHPA has included services that can prevent the need for hospitalisation, such as community palliative care services.

For the first time IHPA has included extending activity based funding to subacute services, such as rehabilitation.

“Activity based funding creates a new transparency and better value for public money spent on public hospital services, and this year it is further refined and extended to subacute services which are a key service for patients and help relieve pressure on acute hospitals,” said Mr Solomon.

“This has been a year of consolidation and ongoing development for IHPA, which has seen the whole national efficient price process successfully brought forward to February. This will help states, territories and hospitals with budgeting time frames,” he said.

Activity based funding is payment for the actual hospital services that are provided. Put simply, the national efficient price multiplied by the national weighted activity unit (NWAU) provides the total cost of a hospital service. For example:

  • A tonsillectomy has a weight of 0.6701 NWAU which equates to $3,346
  • A coronary bypass has a weight of 5.6830 NWAU which equates to $28,375
  • A hip replacement has a weight of 4.1742 NWAU which equates to $20,841.

This year for the first time IHPA has also released a national efficient cost for services that are not suitable for activity based funding, such as small rural hospitals. This will determine the Commonwealth contribution to block funded hospitals. This is the first time that Commonwealth funding for rural hospitals will be based on a consistent national approach. 

The national efficient cost for 2013-14 is $4.738 million, the average cost of block funded hospitals across Australia. Small rural hospitals’ funding levels will be weighted relative to this cost based on their size and location (for example, very remote location). 
“In determining both the national efficient price and the national efficient cost, IHPA has consulted widely with the Commonwealth, state and territory governments and the general public,” said Mr Solomon.

“Submissions received during this consultation process have helped shape the Pricing Framework for Australian Public Hospital Services 2013-14, and IHPA appreciates the collaborative and constructive approach taken by both Commonwealth and state/territory governments in this important reform program.

“The Pricing Framework outlines the principles, scope and methodology adopted by IHPA to provide all parties with transparency on IHPA’s deliberations,” concluded Mr Solomon.

For a full copy of the national efficient price and national efficient cost determinations and the Pricing Framework for Australian Public Hospital Services 2013-14 visit www.ihpa.gov.au

For more information contact:
Anna Flynn
Communication Manager 
communications.ihpa [at] ihpa.gov.au 
0403 620 468


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